good evening, i'm eliot spitzer. welcome to the program. tonight, breaking news. the bin laden diaries. it turns out when osama bin laden wasn't watching himself on tv, he was keeping a journal, writing all of his terror plans out in longhand. among the notes he wrote to himself, important dates coming up in the united states, just so he wouldn't forget when to attack. one of those dates was the fourth of july. another, the tenth anniversary of september 11th. and, oh, yes, he mused in his writings about all the best ways to attack and kill large numbers of americans. we'll have more detail on osama's terror diaries. first, a quick look at the other stories we're drilling down on tonight. most americans are happy that bin laden is dead. guess who else is celebrating? the taliban. then, goldman sachs. want a job there? you'll need education, language

skills, experience, motivation. and one more thing says matt tiabi, the ability to lie with a straight face. and epic floods. the mississippi is rising. and so is the cost. e.d. hill takes a closer look at a disaster in the making. but first, that handwritten diary wasn't the only terror blueprint osama bin laden left behind. he also kept his records on thumb drives that his helpful courier reportedly carried out to followers. what they found at the compound is an indication he had serious terror plans. overall, this appears more serious than previously known. joining me now, the associated press reporter kimberly dozier who first reported many of these details. thank you for joining us. >> great to be here tonight. >> am i correct reading these documents gives us a different

sense of the role osama bin laden was playing day to day in running al qaeda? >> absolutely. it shows a man who was in touch with his operatives. now, it took them a long time to get his messages back and forth through that courier anthd the thumb drives. he was helping them what targets to hit. he was really part of the overall strategy for aqap, al qaeda in the arabian peninsula in yemen. they thought he was an aspirational figure. they thought he was someone that kept the faith alive for his followers around the globe, but wasn't involved in actual terror plots. >> kimberly, as you say, the image had been he was a distance chairman of the board. calculating how many deaths he

thought was necessary to impose on the united states to get us to change policies in afghanistan. kind of an eerie, sick mentality. describe for us the kinds of writings you see in these documents. >> some of them were really philosophical. he was trying to calculate what is going to make the american government pull u.s. troops, pull its presence out of the entire arab world. he concluded that the small-scale attacks that al qaeda had been doing around the globe weren't producing those results and he was calculating, does it need to be 1,000 americans dead, 2,000 americans dead or did he have to get his followers to do another 9/11 to change u.s. policy. he concluded that the u.s. public was the center of gravity for the u.s. government. he also was directing them on specific targets like he was saying stop with new york, think about l.a., think about smaller american cities that don't have great security. he was really helping them think through that process. and even helping them decide

overall terror plots like -- remember last december there was a terror alert across european cities of some sort of diffuse p plot by al qaeda. it turns out he was part of planning it. >> one, we are -- intel was fundamentally wrong about his role. how does our intel establishment look at its own conclusions and re-evaluate its own capacity to figure this out? >> it's been very disturbing for intelligence officials. it's put a lot of their conclusions on their head. but they say one reassuring thing is now they know how involved he was. how he was a sort of -- one described it to me as a shepherd to his flock and the flock really heeded his words. they don't see anybody else in al qaeda with that kind of influence. al qaeda number two, ayman al zawahiri, is not well respected. he's known as a bit arrogant. as one analyst described it to me.

he manages to alienate a lot of the people he works with by not being inclusive about their points of view. that could spell good news for the counterterrorism community. at this point, what they're trying to do, is get through all this merial, though, and find out, is there another plot they were unaware of that is mentioned somewhere in osama's diary or these flash drives to look for? >> somehow a shepherd to his flock is much to pastoral a metaphor -- >> i'm quoting. >> all right, we'll push that back to them. the other thing, he has failed. if he was basically postal tizing about the virtues of big-scale events, they haven't been able to execute. it makes you wonder, yet he's writing these things, almost like the mad scientist stuck in his compound, maybe nobody's listening to him. >> well, they're listening. what they found -- what u.s. counterterrorism officials say,

it shows what they put in place is blocking these attacks. it's -- that they're -- the fact that they were aware of every single terror plot that bin laden mentioned in his writings they're taking as a positive sign that they have learned how to catch these guys in the act. but they're going to search through those files, those document, the five computers, for the next weeks, months, until they are sure there's nothing else out there that was under way. >> all right, kimberly, thank you for your reporting. no question about it, those thumb drives are going to be taken apart. thank you so much for that great report. now to the controversial photo of dead osama bin laden. very few people have actually seen it. yesterday, the cia offered to show it to members of the armed service and intelligence committees in congress. today, they had their first view. senator, thanks for joining us. >> nice being with you. >> i have to say, you had been a

proponent of releasing pictures. now that you've seen it, first describe it to us or describe the pictures, plural, to us, and has that changed your view? >> no. i will describe it to you. there were 15 pictures. the first 12 were taken in the compound -- it is obvious it's right after the incident took place. they're pretty grueling. the other three were taken on the ship. they included the burial at sea. so i would say this -- three of the first 12 pictures were of obama when he was alive. they did this for positive identification purposes. one of the things that was -- i had to make my own conclusion on this because they're not really sure. one of the shots went through an ear and out through the eye socket. or it went in through the eye socket and out -- then exploded.

it was that kind of ordnance that it was. that caused the brains to hang out of the eye socket, so that was pretty gruesome. the revealing shots really, i thought, the pictures, were the three that were taken on the "uss vinson" in the northern arabian sea, and they were the ones that showed him during the cleanup period. he had some kind of undergarment, very, very pale. they had taken enough blood and material off his face so it was easier to identify who it was. then of course the burial at sea, had the transition -- first of all, identifying who it was. then of course the fact that they buried him at sea. >> senator, there's absolutely no question in your mind, to come back to the very first basic question, it was osama bin laden, there's no ambiguity in your mind based on your capacity to do a visual i.d. from the pictures? >> eliot, i have to say i believe that beforehand, because of conversations i had with the

military, but absolutely, no question about it. i've seen them. that was him. he's gone. he's history. now, i still believe they should release these pictures, some of these pictures, to the public. at least the ones during the cleanup period on the "vinson," that's just a personal opinion. >> it was debated over the past couple of days but the notion that these pictures would somehow become iconic images that would turn him into more of a martyr and therefore incite more violence, you just don't find that persuasive? either you didn't think that beforehand, but seeing pictures does not change your mind? >> no i think just the opposite. i think then he would become martyred. i don't buy this whole concept that's coming out of the white house that, you know, you don't want to do this, you might make the terrorists mad. you know, those people want to kill all of us anyway. they've tried 32 times, maybe more than that, during the --

since 9/11, and it's very sophisticated plans to do some -- inflict a lot of harm to america. we've stopped each one of them. if they have a way of doing it, they're going to do it anyway. it's not going to be because they have seen some gruesome picture -- >> right, certainly not to quibble -- i think the argument isn't so much people who are already members of al qaeda would be incited to violence, you're absolutely right, they already want to perpetrate heinous crimes. the question is, is there a larger audience out there that may not yet be prone to violence? one last question. documents that are coming out, the thumb drive, the handwritten documents bin laden kept, seem to be changing fundamentally our sense of his role day to day in running al qaeda. you've been privy to all this. does it make you wonder whether some of our presumptions about him and the organization have been equally off base now that we have to rethink all this? >> well, no, i think we have new equipment. my perspectives from the senate armed services committee, so i've just heard about the new

evidence that's coming out. it's going to be -- i'll be anxious to look at it. i think you get back to the basics though. we've got a lot of people out there that want to keep this thing going. i think this is the first major step and i'm glad it happened. >> all right, senator, thank you so much for joining us tonight. >> thank you, eliot. angry accusations against the united states today by none other than omar bin laden, fourth son of osama bin laden. in a statement published by "the new york times," bin laden and his brothers called the killing of their father a violation of international law. while omar bin laden has condemned his father's violence tactic, today, he said, quote, we now condemn the president of the united states for ordering the execution of unarmed men and women. r ressa sayeh is in islamabad. do the sons have anything to

stand upon? >> reporter: they lived together in the 1990s, late 1990s in afghanistan, but omar bin laden left osama bin laden after he denounced his violence. this is a pretty scathing statement by omar bin laden. he's clearly outraged over the u.s. raid on his father's compound here in pakistan last week. he started off by saying he doesn't believe his father's dead. and he needs to see some solid evidence to be convinced. maybe his body. he goes on to say, if he is dead, he has the right to question why they executed an unarmed man. he called such an execution a violation of both international law and u.s. law as well. he condemned the burying of osama bin laden at sea. and also condemned u.s. forces for shooting an unarmed woman. you'll recall u.s. officials said during the raid navy s.e.a.l.s shot one of bin laden's wives in the leg when he rushed one of the s.e.a.l.s.

so based on what we know of omar bin laden, he's not making the scathing statements against the u.s. because he was a big support of his father. as we mentioned before, these are two men who were estranged a long time ago. >> in my judgment, i'm a lawyer but this is not my area of expertise. it's a ridiculous legal claim. it should be thrown into the trash heap of so much else that comes out of the bin laden family. having said that, the question i've got is whether or not omar bin laden stepping out this way is evoking any public support within pakistan, in islamabad, in abbottabad? are you seeing people respond to the bin laden family, with shows of public support. >> reporter: not at all. in fact, any kind of public support for osama bin laden has been muted here in pakistan, in islamabad. there really hasn't been any significant backlash in response to the death of bin laden and the u.s. raid on the compound. we've seen pockets of protests from hard-line religious groups

here. certainly nothing wide spread. we haven't seen large-scale attacks either. we've had some threats by al qaeda linked groups, the pakistani taliban, the afghan taliban have come out and vowed revenge for bin laden's death but, again no large attacks here against civilian targets, military targets or u.s. targets, ever since this raid took place. >> one other question, can you sense day to day, is the relationship between the united states and pakistan, is it beginning to improve after a lot of heated rhetoric over the past day or two? are things beginning to -- is the level of rhetoric getting lower? >> reporter: it is getting lower. but i think people have to see substantial moves by pakistan. that's an indication of them trying to restore confidence. i think even though the temperature is lower a little bit, we've never seen this relationship so strained, so uncertain. and i think in the coming weeks,

in the coming months, it will be very interesting to see what pakistan will do under this type of pressure from washington to restore confidence in this critical partnership. >> going to be fascinating to watch. thank you for that report. coming up, pakistan may be about to do something that will permanently destroy its relationship with the united states. lexus holds its value better than any other luxury brand. ♪ intellichoice proclaims that lexus has the best overall value of any brand.

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it was the one hitch in an otherwise brilliant operation. the tail of the helicopter left behind on site. now the equipment is in pakistan's hands. what the pakistanis may do with it is scaring so many people in the u.s. government. now to brian todd in washington for more on the possibility our supposed ally pakistan is going to share our secret technology from that chopper with china. what's going on here, brian? >> reporter: eliot, we're learning incredible new details on the classified stealth helicopters used in that ben laden raid. there are concerns tonight some technology may soon fall into the hands of the chinese if it hasn't already. in their haste to get out with the body of osama bin laden, navy s.e.a.l.s detonate their disabled helicopter but one crucial part is left behind, largely intact. the tail rotor assembly left outside the compound's wall where it crashed. pakistani troops were seen hauling it away. now, serious concerns that america's chief technological

rival will learn some key secrets from the wreckage. >> we ought to assume the chinese are going to get this technology, they're going to get it all. >> reporter: former congressman pete hoef straw who was the ranking republican on the house intelligence committee are certain the pakistanis will share the technology with their close allies the chinese. >> they'll reverse engineer it, have the latest technology at minimal cost. >> reporter: a senior pakistani intelligence official denied a report that china approached pakistan for access to the wreckage and said pakistan would not make it available to the chinese. aviation experts say they've never seen this kind of stealth helicopter in operation before. they believe it's a modified blackhawk with a key component covering the rotor blades. this disc is key to making this such a unique stealth aircraft, right? >> this disc is unique to this helicopter. what you see here is a device that has two purposes. one, to reduce the noise from the rotor blades. secondly, to reduce the possibility of it reflecting radar waves back to a missile

attack that might be able to go after the helicopter. >> reporter: experts say the sound suppression technology makes some differences. first, what a standard blackhawk helicopter sounds like. this has a rihythmic kind of woosh-woosh sound. now we'll show you what a stealth helicopter sounds like. experts say this sounds a lot more vague. you may not be able to tell whether this is another vehicle entirely or helicopter. you may not be able to tell whether the helicopter's moving towards you or moving away. experts say the small wings, called stabilizers, are also unique to this chopper. they're usually at a hard right angle but these are angled off, analysts say, to avoid radar detention. the chinese have a huge interest in this technology. they're developing a stealth fighter jet called the j-20 which they've already test flown. contacted by cnn, a chinese

official in washington said he had no information on whether his government has tried to get access to the tail section of that helicopter. u.s. officials are not commenting on reports that they have asked the pakistanis to give the wreckage back. eliot. >> i hear there are also more details coming out about how that chopper crashed in the middle of the raid. >> reporter: that's right, a senior pakistani intelligence official has told cnn that when the u.s. helicopter crash landed, the local pakistani military units initially thought it was one of their own assets that crashed. they called all their regional military bases to see if any pakistan craft were airborne at the time. it wasn't until sometime later they confirmed the presence of foreign aircraft inside pakistan. by that time, we're not sure, but the s.e.a.l.s could have been long gone. >> all right, brian, fascinating tale, no doubt. this will continue. we'll be talking to you more. thanks for that report. now, for more on the bin laden terror diary. we've learned a lot today about osama bin laden. but the most important thing we've discovered is he still had

big plans, plans that involved 9/11-scale attacks in other u.s. cities. chad suites, a former cia homeland security officer. i know you have a lot to tell us about the stealth chopper but first it seems we totally misunderstood the role that osama bin laden was playing within al qaeda over the past couple of years. >> i think the diary's definitely indicate a much more active operational law than the intelligence community originally assessed. it's much more of a strategic level than tactical level. the issue of him berating or pressing his own troops to get out and try to replicate an attack on the scale and scope that he was successful in perpetrating on 9/11 is evidence that he is still frustrated that he's not been able to succeed in carrying off another 9/11. think the other thing that's very telling is when you actually look at it, this sort of schism between the -- call it the old school and the new school.

the old school is the bin laden and zawahiri which is kind of the older generation that believe in these extremely, you know, sophisticated, long-term plots that are high impact, so they're kind of lower volume, higher impact. versus the anwar al awlaki school, the younger generation, that believe in the higher volume, maybe lower impact. so as we saw in the writings, he is berating his troops to kind of get out and follow his example. it reminds me a little of the grandfather who says i want you young whippersnappers to do it the way i used to do it. what we'll see now on the negative side of theolog ledger these younger guys that were somewhat constrained in trying to respect bin laden's stature will now be unleashed. i think some of the things we're seeing in the way of the intelligence community talking about this information is actually a conscientious reaction to that original miscalculation. >> chad, it's kind of intriguing, because it doesn't seem as though he was able to

sper persuade them he was right. what we know of the plots were the smaller scale, not the higher impact. he was arguing to them, the only way to get the united states out of afghanistan, out of the middle east, is with what he called the high impact, high volume. he calculated the number of deaths he wanted. he didn't seem to be persuading them or at least capable of ordering them to follow his agenda. >> right, you're exactly right. i think there's what's called aqhq, al qaeda headquarters, and then there are other branches, aqap, al qaeda in the arabian peninsula, is an example where you're exactly right, eliot, they basically disagreed with headquarters, and were out there, openly, conducting operations that, in fact were not aligned with the leader and headquarters. if you go down the list, what i will say is you look at metrics the terrorists consider for success. one is fund-raising, operations. two and three is propaganda. on all three of these metrics,

aqap was actually far exceeding aqhq, meaning headquarters was being outstripped by anwar al awlaki on the fund-raising side. he was raising all the money. if you think about operation, let's look at the last several high-profile opportunities. one was the christmas day bomber. he was behind that. look at ft. hood. he was behind that. look at times square, he was behind that. operationally, this is all being driven from anwar al awlaki. secondly, he's an american, and most dangerous propaganda right now is "inspire" magazine, which he is the author of. so this is a guy we have to be very worried about. i think he's frankly outstripping bin laden -- >> chad, it's fascinating, almost as though you're describing bin laden back in his compound not literally a cave but almost emotionally in a cave, frustrated he hasn't been able to get the rest of his organization to follow what he thought is the wisdom of his prior path. but before time runs out, i want to give you a chance to talk about the stealth helicopter we

left behind in the attack on his compound. how much harm does that do to us and what do you think the likelihood is pakistan actually would turn that over to the chinese? >> i think it could -- it could be very devastating in terms of revealing technology, stealth technology. i actually think this is a cry for help. this is evidence of a struggle within the pakistani establishment. there are clearly factions that are pouting, that are expressing their -- how upset they are. we saw that with the disclosure and leak of who the cia station chief was. we're seeing that now. this is sort of a reminder to say to the united states, look, we have other potential sponsors like china to offset you. if you disagree with us too much. on the positive side of the ledger, i worked in the cia on the mujahadin resupply efforts to get the soviets out of afghanistan and we could not have done it without the isi and pakistan. if you look at other little things. i'll draw your attention to associated press story that just

came out today, showing that there are three more kills in northern pakistan today and actually this was leaked by pakistani officials and who basically indicate tlaerd not authorized to speak to the media but this was done through a collaboration between local informants and intercepts satellite phone conversations. the pakistanis don't have satellites that can do this. so this was an example of local informants working from the pakistani side with satellite intercepts from us. a joint operation that's going on post-bin laden. so there are some positive signs on the ledger here to keep in mind. this is, again, evidence of a struggle between different factions, some being pro-u.s., some not. >> i think chad just points out, as you just made clear, that everything in life is more subtle than the simple black and white articulation than you hear in the screaming coming out right afterwards. also, so much in life is a negotiation. the pakistanis saying we got something of value to you, now

come back and help us, whether it's money, intelligence, greater respect for their sovereignty, whatever it may be. a subtle careful negotiation going on now. >> right. in closing, you know this from your prosecutor day, one great act of confidence building they could do on the pro-u.s. faction within the pakistani government is covertly, quietly, discretely, give us access to that compound. you know from your background, a second treasure trove sits at that compound. it's like a "csi" on steids opportunity. if we could get in there and get the forensics from lleyton fingerprints, latin fingerprints, dna from fallen hair, that would be incredible, as you know. >> thank you. americans were cheering bin laden's death but we weren't the only ones. so was the taliban cheering also? that story when we return. ♪ [ male announcer ] in 2011, at&t is at work,

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michael semple has worked in afghanistan and is one of the leading experts in afghan

politics. michael says despite what you might think, there was no love lost between osama bin laden and the taliban and now is the perfect time to try to negotiate a peaceful settlement to the conflict there. welcome. >> good evening. >> explain this completely counterintuitive notion to me. you're saying the taliban is almost cheering at the death of osama bin laden. >> we have to be careful not to do this publicly but certainly many in the taliban unit, including people in the leadership privately, say good riddance. as far as they're concerned, bin laden is the one who led to the toppling of their government. they lost their government because of this man. >> explain that to those of us who have not been as steeped in afghan politics. take us back through the history of what the relationship was between the taliban and al qaeda and what led to the toppling of the taliban government. >> the taliban movement took over the government in afghanistan by capturing the

capital in 1996. they inherited bin laden. he'd already arrived. the taliban had their own business, which was to try and capture afghanistan and try and put an end to the civil war there. osama managed to get into the confidence of the leadership there. in 1998, while in afghanistan, he of course declared war on the crusaders, meaning the united states. after he launched the attacks on the east african embassies of course he goes to the top of the u.s. wanted list and the sole demand the u.s. had of the taliban movement was to hand him other. it was the refusal of the taliban leader, mullah omar, to hand him over, osama bin laden, meant that bin laden was able to carry on with the plotting of the 9/11 attacks. and then of course led to the u.s. intervention in afghanistan, to topple the taliban government, precisely because they'd failed to hand

over the culprit behind both the east african embassy attacks and 9/11. >> what i hear you saying, to reduce this to the cliff notes version of your history there, which was fascinating, if the taliban had basically said to osama bin laden, take your fight somewhere else, either had not let him in, in the mid-'90s, not embraced him in '98, or simply had turned him over in '01, than we would not have gone into afghanistan, the taliban would have stayed there, and there fight with us is something that was ancillary to their overarching objectives? >> that's a conclusion which i have heard many senior taliban reach. and even now, as they sort of sit more or less in hiding and discuss, you know, what happened, how did we get ourselves into this predicament, many of them have concluded that their own leadership called it wrong back in 2001 by, you know, trying to protect bin laden. also guessing the u.s. wasn't

serious, failing to hand him over. the taliban themselves concluded, we gambled, we lost, and we gave up or government for the sake of this man. >> so what does that mean prospectively? what do you think they might want to do now? and i know you have to parse it more. there is no singular "they." there are different factions there. what should the united states do in terms of reaching out to them? >> a lot of the taliban think now with bin laden off the scene, this removes one obstacle to the possibility of some kind of agreement between them and the u.s. who has been intervening in their country. it's one difficult point off the agenda. however, it's going to have to be -- the u.s. and international community that takes the lead and actually proves it. as far as the u.s. is concerned, the u.s. has been caught up in two struggles here.

there's one which is the fight against terrorism going after bin laden, al qaeda international terrorist network, and there's also been another struggle which of course to try and stabilize afghanistan. the fight against al qaeda, no doubt, it will carry on for some years. but it's a different effort trying to stabilize afghanistan. as the u.s. tries to find a way responsibly to draw down its troops in the country, to be able -- basically to get the army home or as much of it as possible, they have to find some way of stabilizing it. the most obvious way, if it works, is to get the taliban on board. basically to get the taliban leadership to call an end to their operations. >> basically, to get the taliban to say, look, we got it wrong in '01, now the issue's moot, bin laden's dead, let's go back to what the game plan should have been, make some sort of peace, and you think that's a possibility? >> i think publicly nobody's ever going to say we're wrong in public, but basically i think -- if it works -- the taliban will turn around and say, now that

we've heard from the united states that it intends you know along with nato to withdraw its troops over a period of time, we see no point in getting ourselves killed fighting for them to go. >> all right, michael semple, thank you for being here. >> most welcome. up ahead, who is groshs, bloated and chronically dishonest?

they got away with it. our recurring series. we spoke with senator levin after he released a damning report last month. in the latest issue of "rolling stone," this writer so uns the alarm. nothing is being done about it. not only have they gotten away with it, they have achieved a kind of corrupt enterprise nirvana, caught but still free, above the law. matt, who is famous for his metaphor, joins us tonight. it seems to me one of the great crises here is for a decade wall street said trust us, if something's about to go amiss, we will stop it ourselves. we will relegate ourselves.

isn't the lie finally being put to that outrageous claim? >> absolutely. there was a process. you were there during this whole time period. wall street continually argued they can self-regulate. there were a series of key moments including in 2004 when they had the consolidated program, when all the banks were supposedly going to self-regulate. goldman argued they would be able to step in if anything untoward happened in the market. this levin report pretty much turns that on its head and proves that when they discovered something critically wrong with the market, they not only did nothing, but they stepped in and fervently traded against the entire market. >> frankly, didn't that work perfectly from their perspective? when their was a crisis, they figured out how to make money on it. isn't this exactly what they wanted? >> they got everything and more. they got their cake and they ate it too. they had no regulation and they -- they actually were right about the fact they caught the

crisis ahead of time. they just didn't anything about it. >> they didn't do the one thing they promised us they would do, which is ring the alarm bell and say we've got to stop it. what i really love is after all this greenspan has gone, whoops, i guess maybe a little mistake. >> little mistake in there somewhere. >> you come up with this beautiful metaphor. you have a way to describe this. tell us what it stands for. i think it's classic in terms of explaining. >> well, it was basically a way to recycle mortgage assets so you could take the leftover bits and turn them into aaa-rated securities. >> aaa-rated securities being supposedly the most secure securities that banks could hold, pension funds could hold. you get a aaa rating, it becomes that much more valuable. they wanted to turn junk into aaa, sort of modern day alchemy. >> the metaphor was high school volleyball gym class. you're choosing up sides for a team. five kids are left over.

now imagine every gym class in the entire state repeats the same process. you take all those leftover kids from all those gym classes -- >> we all sympathize by the way. >> i was actually one of those. you throw them in a gym. choose up sides again. take leftover sides from that exercise. and then repeat the entire exercise across the country. throw those kids in the gym and choose up sides again. you call those first teams the all americans. >> they took the dreck and splashed a aaa rating and said buy this stuff? >> basically, took all the leftover, bottom of the barrel stuff, and recycled it and turned it into aaa ratings. >> they did see the cataclysm coming and wanted to clean up their books. >> they used this term clean. they have these memos they discovered in the levin report where high ranking goldman officials are saying we need to

distribute as many assets as possible and clean previous positions. which basically means, get rid of the crap on our books. >> i want to play a sound bite from lloyd blankfein, his testimony before senator levin's hearing. let's roll that. >> we didn't have a massive short against the housing market and we certainly did not bet against our clients. rather, we believed that we managed our risk as our shareholders would expect. >> all right, now what i want to show you on the screen there and what we put up there briefly, and i'll read it to you, is what he said in an internal memo. he said, could/should we have cleaned up these books before and are we doing enough right now to sell off cats and dogs in other books throughout the division? he wanted to get -- what does he mean by cats and dogs? >> cats and dog, they had mortgage assets they were terrified were going do blow up in their faces and they wanted to get rid of them by dumping them on their clients. >> how big a short --

>> $16 billion. >> $16 billion with a "b"? >> right. at some point, above 50% of var, value add risks. >> their entire firm was at risk because they wanted to get rid of the stuff and they were willing to dump it? >> it's important to remember, goldman in its own internal memo was describing this position as a big short. when blankfein says we did not have a massive short bet, i don't know how that could be true. >> what did they tell people buying the stuff? >> they said they implicitly endorsed it. they said, in fact, one of the clients stated they told him we expect you're going to earn 50% on the assets. >> this is the stuff they called cats and dogs and junk? >> right. at the same time they told one client they expected a 60% return, you have guys selling this particular deal saying, this has major meltdown potential. you know, this is going to blow up. we expect these to underperform. and at the same time, they were

pumping this up to clients. >> and speaking derisively of the people who bought it? >> right. one client bought $100 million of the stuff. one guy said, we found a un cor corn, flying pig and a pink elephant all at once. >> not somebody you speak highly of. >> in other word, they found the ultimate sucker. >> we asked goldman to have somebody come on, but they will not do it. i will read their statement. while we disagree with many of the conclusions of the report, we take seriously the issues explored by the subcommittee. we recently issued the results of a comprehensive examination of our business standards and committed to making significant changes that will strengthen relationships with clients. and enhance standards for the review, approval and suitability of complex instruments. that was the response to the scathing report from senator levin. >> i'm not even sure what that statement even means. does that implicitly accept they

made mistakes before? >> you end the article with a powerful observation, which is there have been people indicted for making false statements, perjure, before congress -- >> right, roger clemens. >> barry bonds was indicted, not for statements before congress but for lying in the course of an investigation about steroids. and yet nobody yet indicted for the testimony from goldman. >> right, yeah, i know, and we went through -- we did in this article, we went through the statements they made in testimony before congress and we found, you know, virtually exactly contradictory statements. our question is, what is the justice department waiting for? if they pursue the case against clemens for lying about getting a shot of steroid, what about these guys? >> a lot of texas ranger fans in the justice department. as always, great stuff. democrats say congress has to raise the debt ceiling or else. i'll talk with a republican who's calling their bluff. stay tuned. we'll be right back. one of our nine models over 30 mpg highway.

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the federal debt ceiling. what does that mean? if you think of debt ceiling as our nation's credit card, that credit card will max out monday. moving some money around will supposedly hold us till august but it's a tug-of-war between democrats and republicans. utah republican jason chavitz joins me tonight from capitol hill. welcome back to the show. >> thank you, glad to be here. >> here's the thing i've got to challenge you on right out of the box here. i know -- i listen to what speaker boehner's speech the other night. he is saying we need to cut trillions of dollars, no revenue. driving a hard bargain, as are you. i looked at your own budget bill. the budget that the house passed. sanctioned by speaker boehner and paul ryan. you require a trillion dollars of borrowing for your own budget over the next year. so why can't you just say to the american public we all know we need to borrow, let's get it done so we don't sacrifice our credit rating, and then figure out the large tough issues

starting next week? >> look, the so-called paul ryan budget actually puts us on a trajectory not only to balance the budget but to pay off the debt. it takes a long time. if we're moving on that kind of trajectory, i think you would see people vote to increase the debt ceiling but to just increase it without those kinds of cuts, no, we're not going to to it. >> i got to challenge you, paul ryan's budget proposal, i'm not a ee efan of it, it adds $6 trin of debt to the budget, to our nation, over the next decade. those are the facts i think we can agree on. even if we were going to do that, we'd have to increase the federal debt ceiling by $6 trillion. we're not going to agree on the parameters of the budget between now and next monday. nor is this the moment to really have that debate. so why don't we get this out of the way to calm the credit markets and securities markets and then next week begin what will be a very healthy and hopefully intellectually driven

debate about what the budget should look like? >> i think it's fundamental wrong to continue to kick this thing down the road. to just punt on this and say we'll deal with this after the election. no, we got a crisis right now. there's some of us who believe we can no longer delay on this. we have to make the cut right now, right here today. i should mention, i would be in favor -- i would encourage speaker pain, let's have a straight up or down vote. let's see how many people on the democrat and republican side of the aisle would actually vote to unilaterally raise the debt ceiling. i don't think it would pass. i think it would be very bipartisan to say no, we're not going to do that. >> i'm not saying push it back until after the 2012 presidential election. we need to figure this out. but we're not going to figure it out between now and monday. i think we both accept that as a matter of how washington works. let's get the debt ceiling out of the way because everybody's plans requires significant borrowing over the next year or two year, three years, so let's get this out of the way so we

don't drive interest rates up and then begin the very healthy debate. that makes sense to me. let me challenge you on one or two things. speaker's speech wasn't yours. i don't want to hang that around your neck. he did say some things in there that are problematic to me as a matter of raw economics. he said government spending now is crowding out private sector investment. crowding out is a theory of when the government does things and drives interest rates up, the private sector can't borrow. that's simply false. interest rates are at historic lows. there is no crowding out. that was the predicate of his speech. >> i think there are some fundamentals that a lot of us would agree upon. with the massive federal spending we have, we're about to see hyper inflation. we don't have an energy plan. that's why we're seeing rapid rises in energy prices. there are a lot of factors that are coming together. we do see a rise in interest rates that i think will inevitably happen. we are spending too much money, pouring too much money into the

marketplace and we've created so much uncertainty that businesses don't know how to make investments, they aren't opening up new manufacturing plants. we are crowding out the capital that needs certainty in order to make the investments needed to grow. >> as somebody who studied economics, this is simply not crowding out. energy prices are not because of the federal deficit. energy prices are driven by the aspects of that market in the middle east and the dynamics in north africa, completely unrelated -- >> our federal government is not helping. >> i agree -- >> it is absolutely not helping. >> look, congressman, we need an energy policy and we can have that discussion. but that's not really where we're falling down right now. the markets -- you're a market guy. the markets are saying, interest rate, the federal government is borrowing at historic lows. this is simply not a situation where the market is saying, we are going the way of greece. what was the trigger for greece? the credit default swaps there showed their interest rates were skyrocketing. point to me one sign of an increase in interest rates for the federal government. >> well, look, we're at -- our

gdp. we're -- our debt is at 95% of gdp. you can no longer continue on that trajectory. i think the bond markets are quite tired of actually us putting out so much debt. february alone our deficit was $220 billion. for the shortest month of the year. we can't continue on that trajectory. and until the markets see we're going to pay off debt and be responsible, i think you'll see a national rise of interest rates because they're tired of us showing so much debt. >> i'm with you, we need to deal with this, it's a medium term problem but the markets are simply refute everything you said. they're simply not driving rates up. >> what about the unemployment? you have unemployment at 9%. all of this massive government spending, did it do anything to change the unemployment rate? no, it didn't. we have to make the climate more conducive for businesses to grow. not for government to grow. since barack obama took office until now there are 160,000

additional federal workers. we can't keep going on that. we have to make changes like instituting the ryan budget in order to put us back on track. >> all right, look -- >> for guys like me to raise the debt ceiling, we need to do something that dramatic. >> you're a first term congressman, learning to filibuster well. i disagree with you, about 99 prgs of what you just said -- >> thank you, if you agreed with me, it would scare me to death -- >> one thing we -- >> i'm going to use that on my campaign chishl. >> one thing we agree on is skiing in utah is great stuff. we'll have to do that some day. thanks for joining us. we'll be right back. building up our wireless network all across america. we're adding new cell sites... increasing network capacity, and investing billions of dollars to improve your wireless network experience. from a single phone call to the most advanced data download, we're covering more people in more places than ever before in an effort to give you the best network possible. at&t. rethink possible.

that does it for us tonight. thank you so much for watching. good night from new york. "piers morgan tonight" starts "piers morgan tonight" starts right now. -- captions by vitac -- www.vitac.com